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LONDON Feb 18 (Reuters) - Florida Citizens Property
Insurance Corporation will sell $250 million of hurricane
coverage to investors in 2013 to recoup some of the cost of
covering natural disasters in the state, the insurer said.

Florida Citizens said it would increase its hurricane
protection coverage to $1.75 billion this year, by selling an
extra $250 million via a "catastrophe bond", notes from a board
meeting showed.

The state-backed insurer sold a $750 million cat bond last
year, saying it was cheaper than buying traditional reinsurance
for Florida hurricane risk.

Cat bonds allow insurers and reinsurers to pass on some of
the natural disaster risk on their books to capital market
investors, freeing up capital for other parts of their business.

Buyers of cat bonds benefit from returns that are largely
insulated from wider economic or financial market developments,
but risk losing some or all of their money if a catastrophe
occurs.

The cost of insuring hurricanes in the United States' most
vulnerable regions have become more expensive, especially in
high-value areas like Miami, as the population grows and
insurance penetration rises.

In its $1.75 billion budget, Florida Citizens will sell an
extra $250 million of coverage via the capital markets, and buy
$500 million from traditional reinsurance - which covers
insurance companies looking to unload risk, the insurer said in
a statement.

Florida Citizens is the state's largest property insurer and
handles nearly 1.5 million policies and faces more than $500
billion in potential risk.

By law, the company has to find enough cash to cover any
potential claims from a hurricane so big that it only that
happens once in every 100 years.

If Florida Citizens needs reinsurance, it gets much of that
coverage from the Florida Hurricane Catastrophe Fund, which
funds any payouts by issuing billions of dollars in municipal
bonds after a major hurricane has already struck.

But these funds have not been enough to cover all the claims
going back to Hurricane Andrew in 1992, so Florida Citizens
tapped the private reinsurance sector and the capital markets to
help it pay its claims quickly.

Investors had been expecting Florida Citizens to come back
to the cat bond market after the insurer secured $750 million of
hurricane protection via a cat bond last year.

A the time, the bond had been expected to raise just $200
million, but was increased by $550 million after high investor
interest in the deal brought down the price of the deal, making
it cheaper for Florida Citizens to buy cover through the cat
bond market than through traditional reinsurance.

In another attempt to lighten the burden of paying claims,
Florida Citizens transferred 31,000 policies totaling $30
billion of coastal wind exposure on its book of business to
start up Florida insurer Weston Insurance Company last week.